SHANGHAI — The Shanghai Film Festival signed off on a positive note last week, reflecting a powerfully expanding biz in China, but local filmmakers are casting fearful glances over their shoulders at swelling competish from Hollywood.

Boosted by extra funding, organizers finessed the nine-day event in China’s biggest city into one of the best editions in its 15 years.

Shanghai has had to deal with competish from Beijing for the past two years, and no longer has the Chinese film fest market to itself. But it remains a powerful draw for the biz in China and for those seeking co-production opportunities here.

More than 300 domestic and foreign-produced films were screened at 33 cinemas during the fest.

The market is growing but domestic movies are taking only a small percentage of this increase, and producer Andre Morgan, a long-time veteran of the Asian market, said overseas product was going to prove tough to beat.

In the first five months of this year, 34 foreign films, including “Titanic 3D,” “Battleship” and “The Avengers,” accounted for more than 65% of B.O.

The increased quota of U.S. films, raised from 20 to 34 including 3D and Imax pics, caused many a furrowed brow although Bona prexy Yu Dong was pragmatic.

He told Variety, “The challenge is to make domestic movies stronger by absorbing techniques from American movies like 3D and Imax. But first of all, we need good Chinese movies that satisfy the demands of the local market where we have the advantage.

“Hollywood movies have revenue streams other than B.O., which is something the local films don’t have. As a filmmaker you are more than 90% reliant on ticket sales because pirate DVD and download sales come into play fast.”

China’s most bankable helmer, Feng Xiaogang has a major problem with piracy.

“Chinese directors don’t have any market in the world. It’s not just me who thinks this. This country is full of fakes — fake milk, fake football, piracy. Why should the world be interested in hearing our stories. I once went to an anti-piracy meeting in a stadium full of 18,000 people. The host asked ‘do you watch pirate DVDs?’ and everyone answered ‘yes’ resoundingly,” said Feng.

Scribe Liu Zhenyun’s “Remembering 1942,” helmed by Feng Xiaogang and starring Adrien Brody and Tim Robbins, was presented at the fest. He said China remained too provincial.

Speaking at a panel on telling Chinese stories to the world, he said, “Americans don’t tell American stories to the world, they tell stories that have universal acceptance. We are a big country, but we are very anxious — ordinary people are anxious, professors are anxious, business people and politicians are anxious.”

One of the most eloquent expressions of frustration came from rising helmer Lu Chuan. The “City of Life and Death” director was hoping to bow “The Last Supper,” a costume drama about two warring generals, but had fallen foul of the censors.

Censorship put Chinese directors at a disadvantage when competing with Hollywood, he said.

“We need a fair, relaxed and comfortable environment to be creative, like Hollywood has. Their movies can have aliens attacking Los Angeles, even flooding the White House. Film should not just be a propaganda tool,” he told one forum.

There are signs of hope. Huang Rongnan, a lawyer at the Jun He law office, said that there was a chance that the censorship rules could be changed. Huang said new rules on regulating promotion of Chinese films meant that provincial governments would be given censorship powers, rather than everything having to go through the State Administration of Radio, Film and TV’s Film Bureau.

“This means that more movies will possibly pass censors and get a theatrical release. This promotion law will help the financial industry co-operate with the movie business,” Huang said.

The venue this year was again the Crowne Plaza hotel, which has not changed a jot in years but a lot of the action seemed to be going on in the fabulously refurbished Peace Hotel on the Bund waterfront.

This hotel has serious cinematic pedigree. It featured in Steven Spielberg’s 1987 “Empire of the Sun,” the first Hollywood movie to be made in China after 1949, starring a young Christian Bale, who returned last year to shoot Zhang Yimou’s “Flowers of War.”

The private shingle Bona held its party there, and there were various huddles of producers and bizzers, such as U.S. thesp Heather Graham, who was on the jury alongside local Chinese thesp Li Bingbing, producer Terence Chang and helmers Zhang Yang, Bela Tarr and Rakhshan Bani-Etemad. The jury was led by French helmer Jean-Jacques Annaud.

Khosro Masoumi’s “The Bear” won the Golden Goblet for best feature at the fest, the second time the Iranian helmer had won after “Tradition of Killing Lovers” in 2004.

The award for most promising co-production in development went to French producer Igor Darbo’s “The Dragon Angel,” a story about an American boy who saves a traditional Beijing house from being knocked down. Pic is set to be helmed by Ning Ying, with a script by Dana Ziyasheva and toon effects from China’s Pixomondo.

“The vibe I caught was that, even more than last year, talks focused on international co-productions, export potential of Chinese films, how China can tell its stories to the world…that everyone is chasing this dream of the perfect blend of East and West,” said Darbo.

“Competition from Hollywood is a huge incentive to be extra creative in telling local stories in a way that can reach out to increasingly sophisticated local auds.

“We have written a story that does not trivialize China and has complex characters, both Western and Chinese without a simplistic black and white line separating good guys from bad guys. In turn, this should facilitate passing censorship.”